Bernanke Warns on Debt-Limit ‘Chaos’

U.S. Federal Reserve Chairman Ben Bernanke warned Congress could create financial and economic “chaos” if lawmakers bind together raising the short-term debt limit to fund the federal government with fundamental fiscal restructuring.

Testifying before the Senate Banking Committee, Bernanke said that he strongly supports Congress making the budget changes necessary to reduce the mountain of debt and rising deficit facing the U.S. in the years ahead. He said the fiscal challenges facing the U.S. is the top long-term priority the government needs to tackle.

But the Fed chief said he’s worried about lawmakers using the need to raise the debt ceiling as a legislative vehicle to enact budget restructuring, as many Republicans are have urged.

A handful of Republican senators, knowing the Fed chief’s concern about debt and deficit levels, tried to leverage that worry into support for a GOP proposal to tie the issues together. But Bernanke returned with a salvo of warnings against linking the two issues.